OPINION Improving cash flow with upfront freight invoicing In this follow-up to FIDI Focuss recent article on industry payment terms, Santa Fe Relocation MOVE COO James Gooding proposes changes to invoicing corporate clients, RMCs and other FIDI Affiliates, for freight services and suggests practical steps for moving the agenda forward F James Gooding, Santa Fe MOVE COO ollowing FIDI Focuss We are not a Bank Getting to Grips with Payment Delays, feature (issue 310), we propose that the moving industry, led by FIDI, launches a discussion on changing how our industry invoices freight to our corporate clients, RMCs and other FIDI Affiliates. In the article, Thijs Deweerdt, Senior Manager and Internal Auditor at EY, highlights that liquidity risks are getting worse, and that the issue is largely poor cash flow. In general, private consumers pay their invoice in full prior to packing, including the prepayment of freight. However, our industry has allowed itself to become a bank for corporate customers, with 30, 45, or 60-day credit terms. The benefits of implementing change in how our industry invoices freight could, I believe, positively improve cash flow management, reduce company risk, and strengthen the overall sustainability of the industry by fundamentally addressing this liquidity risk. It should empower the moving industry to greatly reduce the working capital tied up in providing services to our clients and help to fund further growth of the industry. At the same time, it should benefit our customers by bettering our ability to deliver high level and uninterrupted services. The key consideration for the moving industry should be having customers pay for their freight much faster than the rest of their invoice. This is because the real cash challenge for the industry is the cash flow associated with funding the pass-through cost of freight, especially during the build-up to peak season. COVID and the corresponding impact of increased freight created substantial cash flow challenges for many in the moving industry, which we successfully overcame; however, perhaps now is the time to re-think how we manage and improve this process in the future. Specific challenges or issues that would need to be addressed include: 1. Moves that are quoted as a lump sum that include freight. Movers that want their freight paid earlier would need to list freight separately in the lump sum quote, whereas movers that are not concerned could continue to quote lump sum and extend additional credit terms on the freight as they see fit. 2. Applying margin to freight. This is a reasonably common practice in our industry and, if freight was invoiced earlier, it could still be marked up for the quote as the industry currently does (if backups are not required). If freight needs to be invoiced at cost, the margin lost could simply be added to other elements in the quote to maintain the overall margin of the move. However, there are already clients that require backups and that treat freight as a pure pass-through cost with no margin. Adopting an innovative approach to invoicing should contribute to the overall resilience and sustainability of the moving industry and help companies to be more financially stable. Should we see dramatic increases in freight again in the 60 FF311 Sept-Nov 23 pp60-61 Opinion.indd 60 03/11/2023 15:41